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U.S. workers just got their biggest raise since 2007

On Friday, the latest employment cost index showed that in the first quarter of 2017, wages rose at a seasonally adjusted pace of 0.8%, the most since the fourth quarter of 2007.

The employment cost index captures changes in the cost of labor including salaries and benefits. The monthly average hourly earnings number published alongside the jobs report is the most popularly cited wage measure in the economy. In March, wages rose 2.7% over the prior year.

“All the action in the headline ECI is due to a 0.9% jump in wages and salaries in the private sector, the biggest gain in a single quarter for exactly a decade,” writes Ian Shepherdson, an economist at Pantheon Macro.

“One increase proves nothing, but with the unemployment rate falling below the Nairu, you can expect Fed hawks to argue that policymakers should not delay the next hike.” (The Nairu — or non-accelerating inflation rate of unemployment — is the unemployment rate below which inflation begins to accelerate.)

In March, we learned that the unemployment rate fell to a new post-crisis low of 4.5%. And with the unemployment falling, many economists have expected that wages would rise commensurately as the supply of available labor dwindles and employers are forced to pay more to attain or retain workers.

Quarterly wage growth just had its best quarter since 2007. (Source: BLS)

Following Friday’s ECI report, Bloomberg News reporter Matt Boesler noted on Twitter that the biggest acceleration in wages by industry came from the services sector and transportation & material moving.

Neil Dutta, an economist at Pantheon Macro, noted that construction pay is also on the rise, with wages rising at a rate of 4.2% in the first quarter. “[Homebuilders] are going to have to pay up for workers to meet growing demand for housing,” Dutta wrote.

Friday’s ECI report also follows news on Thursday that American Airlines would gives its pilots and flight attendants a raise two years before contract negotiations were due to take place.

CEO Doug Parker told Wall Street analysts that the out-of-contract raises “might surprise or even dismay some of you because it adds costs to the airline,” according to the AP. Citi analyst Kevin Crissey wrote that, “This is frustrating. Labor is being paid first…again. Shareholders get leftovers.”

But at this point in the economic cycle, the commodity that is labor, which has been abundant and cheap for years since the financial crisis, becomes more scarce. And more expensive.

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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland